NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Gasoline Taxes and Consumer Behavior

Shanjun Li, Joshua Linn, Erich Muehlegger

NBER Working Paper No. 17891
Issued in March 2012
NBER Program(s):   EEE   IO   PE

Gasoline taxes can be employed to correct externalities from automobile use and to raise government revenue. Our understanding of the optimal gasoline tax and the efficacy of existing taxes is largely based on empirical analysis of consumer responses to gasoline price changes. In this paper, we directly examine how gasoline taxes affect gasoline consumption as distinct from tax-inclusive retail gasoline prices. We find robust evidence that consumers respond more strongly to gasoline tax changes under a variety of model specifications. We discuss two potential reasons for our main findings as well as their implications.

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This paper was revised on February 12, 2014

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Document Object Identifier (DOI): 10.3386/w17891

Gasoline Taxes and Consumer Behavior (with Shanjun Li and Erich Muehlegger). American Economic Journal: Economic Policy, forthcoming.

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